Opinion
13-P-1577
10-31-2014
JEREMIAH SHEHAN v. PAUL SCHLEGEL.
NOTICE: Decisions issued by the Appeals Court pursuant to its rule 1:28 are primarily addressed to the parties and, therefore, may not fully address the facts of the case or the panel's decisional rationale. Moreover, rule 1:28 decisions are not circulated to the entire court and, therefore, represent only the views of the panel that decided the case. A summary decision pursuant to rule 1:28, issued after February 25, 2008, may be cited for its persuasive value but, because of the limitations noted above, not as binding precedent.
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
The plaintiff appeals from a summary judgment in favor of the defendant, in his representative capacities, on the plaintiff's claim for constructive trust as asserted in his third amended complaint; the dismissal of his conversion claim; and the denial of his motion for leave to file a fourth amended complaint. Finally, he purports to appeal from the absence of any ruling on his motion to compel. We affirm.
Constructive Trust. The remedy of a constructive trust is imposed under specific circumstances. "If a defendant is unjustly enriched by the acquisition of title to identifiable property at the expense of the claimant or in violation of the claimant's rights, the defendant may be declared a constructive trustee, for the benefit of the claimant, of the property in question and its traceable product." Restatement (Third) of Restitution and Unjust Enrichment § 55(1), at 296 (2011) (Restatement). See Mickelson v. Barnet, 390 Mass. 786, 790 (1984) (embezzler "became a constructive trustee of the money and its traceable proceeds").
To demonstrate entitlement to a constructive trust as an equitable remedy, a claimant must first show that the defendant was unjustly enriched. Restatement, § 55 comment a, at 297. The claimant must then "show that the transaction that is the source of the liability is one in which the defendant acquired specifically identifiable property." Ibid. Alternatively, a constructive trust may be imposed on the specifically identifiable property's "traceable product." Restatement, § 55 comment g, at 308. See id. § 58 comment a, at 379 ("[A] claimant with a right to restitution from identifiable property [may] 'trace' or 'follow' that property, not only through successive transfers but through successive changes of form").
A "constructive trust may be said to be a device employed in equity, in the absence of any intention of the parties to create a trust, in order to avoid the unjust enrichment of one party at the expense of the other where the legal title to the property was obtained . . . in violation of a fiduciary relation . . . ." Foster v. Hurley, 444 Mass. 157, 167-168 (2005), quoting from Barry v. Covich, 332 Mass. 338, 342 (1955). The parties devote considerable time to arguing whether the 1996 Trust and the plaintiff were engaged in a partnership, generating a fiduciary duty on behalf of the 1996 Trust to the plaintiff. It makes no difference whether there was a partnership or a joint venture, however, as joint venturers also owe fiduciary duties to each other. See Berwin v. Cable, 313 Mass. 431, 435 (1943) ("[A] joint venture . . . is similar in many respects to a partnership, and . . . the principles of law governing the remedy by which a partner might recover his share of the profits are applicable to a joint adventurer seeking to obtain his share of the profits of a joint undertaking"). See also Doiron v. Castonguay, 401 Mass. 705, 707 n.2 (1988).
Shehan argues that summary judgment should not have been entered on his claim that Schlegel, either as trustee of the Jon J. Feeney Investment Trust of 2007 (2007 Investment Trust) or as Feeney's personal representative, was liable under a theory of constructive trust for funds he (Shehan) was owed by Feeney from a series of real estate transactions that took place years earlier. The third amended complaint alleges that the funds were (a) placed by Feeney into the Jon J. Feeney Revocable Trust - 1996 (1996 Trust); (b) upon Feeney's revocation of the 1996 Trust on December 3, 2007, all assets of that trust were transferred to the 2007 Investment Trust of which Feeney was trustee; and (c) after Feeney's death in November 2008, Schlegel became the personal representative of Feeney's estate and also the successor trustee of the 2007 Investment Trust.
"When a motion for summary judgment is made and supported as provided in [Rule 56], an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial." Mass.R.Civ.P. 56(e), 365 Mass. 824 (1974). Here, Shehan submitted no affidavit in opposition to the motion for summary judgment; instead he relied almost exclusively on allegations contained in his unverified third amended complaint. "Only if the plaintiff files a verified complaint is the complaint treated as an affidavit for purposes of rule 56 (e). If, as here, the complaint is not verified, then the court considers it only to ascertain the nature of the cause of action or defense and to guide the court in determining which facts are material. Allegations in an unverified pleading are not accorded any evidentiary weight in determining whether there exists a genuine issue of material fact under rule 56(c)." Godbout v. Cousens, 396 Mass. 254, 262-263 (1985) (citations omitted). See Mathers v. Midland-Ross Corp., 403 Mass. 688, 690 (1989).
Setting aside the allegations of the unverified third amended complaint, as we must, Schlegel met his burden of showing that Shehan had no reasonable expectation of proving several essential elements of his constructive trust claim. See Kourouvacilis v. General Motors Corp., 410 Mass. 706, 716 (1991). For example, the record does not show how much Shehan was owed, if anything, when the 1996 Trust was terminated. Nor does it demonstrate what, if anything, were the assets of the 1996 Trust when it was dissolved; which (if any) of those assets were transferred to the 2007 Investment Trust; or what subsequently happened to those assets. Indeed, as the motion judge noted, there is not even any evidence that the 2007 Investment Trust had its own bank account. Similarly, there is no admissible evidence in the summary judgment record to support Shehan's allegations that the net proceeds of the sales were deposited into joint accounts, that Feeney had control over these accounts, or that Feeney received all of the net proceeds in his capacity as trustee of the 1996 Trust.
Shehan points to bank statements identified as belonging to the "The Jon J. Feeney Trust." However, even were we to infer that this notation refers to the 2007 Investment Trust, that inference in and of itself would not make a difference because there is no evidence that any of the alleged partnership's funds were in that account.
The only evidence of a joint account does not refer to any trust, but only lists Feeney's name individually. The checks contained in the summary judgment record do not shed light on this issue. One refers to Feeney, another to "Feeney as Trustee." The check referring to "Feeney as Trustee" does not identify the 1996 Trust. Thus, there is no evidence connecting the net proceeds of the real estate transactions to a bank account held by the 1996 Trust. Even were we to assume that Feeney held these bank accounts as trustee of the 1996 Trust, the plaintiff's argument still fails. A plaintiff alleging that his funds were improperly mingled with a defendant's funds must "satisfactorily disclose what proportion" of the funds belong to the plaintiff, or must show that it would be "impossible to prove the proportion" of the plaintiff's funds to the defendant's funds. Sullivan v. Sullivan, 321 Mass. 156, 158 (1947). See Restatement § 59 (same). The plaintiff has not attempted either route here.
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Conversion. Shehan's argument that his conversion claim should not have been dismissed is not properly before us because he did not identify the dismissal order in his notice of appeal. See Mass.R.A.P. 3(c), as appearing in 430 Mass. 1602 (1999) ("The notice of appeal shall specify the party or parties taking the appeal and shall, in civil cases, designate the judgment, decree, adjudication, order, or part thereof appealed from"). See Siles v. Travenol Labs., Inc., 13 Mass. App. Ct. 354, 354 n.1 (1982). However, in light of the fact that Schlegel does not press the deficiency of the notice of appeal, in our discretion we turn to the merits of Shehan's argument.
"The elements of conversion require that a defendant be proved to have 'intentionally or wrongfully exercised acts of ownership, control or dominion over personal property to which he has no right of possession at the time . . . .'" Grand Pac. Fin. Corp. v. Brauer, 57 Mass. App. Ct. 407, 412 (2003), quoting from Abington Natl. Bank v. Ashwood Homes, Inc., 19 Mass. App. Ct. 503, 507 (1985). Shehan alleged, upon information and belief, that Schlegel "intentionally or negligently transferred, assigned, and/or converted those trust funds [from the 1996 Trust and the 2007 Investment Trust] into accounts other than those of the two trusts." The judge did not err in dismissing the claim, which rested entirely upon this conclusory allegation.
The third amended complaint alleges that Schlegel, as trustee of the 2007 Investment Trust, held legal title to any 1996 Trust assets that were transferred into the 2007 Investment Trust after the 1996 Trust was revoked. Shehan does not allege that Schlegel breached his fiduciary duties to the trust beneficiaries, a claim the plaintiff would not have had standing to raise in any event. Nor does he allege that Schlegel converted funds in his individual capacity for his own use. Thus, the plaintiff does not allege that any possession of such funds by Schegel was "wrongful in its inception." See Atlantic Fin. Corp. v. Galvam, 311 Mass. 49, 50-51 (1942) ("A demand is a necessary preliminary to an action for conversion where the defendant's possession is not wrongful in its inception and demand and refusal are required to put him in the position of a wrongdoer"). See also In re Halmar Distribs. Inc., 968 F.2d 121, 129 (1st Cir. 1992). As a result, Shehan was required to allege that he had made demand upon Schlegel and been refused. Ibid. This he did not do.
Motion for leave to file fourth amended complaint. We review the denial of Shehan's motion for leave to file a fourth amended complaint for abuse of discretion. Audubon Hill S. v. Community Assn. Underwriters of America, Inc., 82 Mass. App. Ct. 461, 472 (2012). We are aided immensely by the detailed and thoughtful explanation by the motion judge regarding his reasons for denying the motion. Having reviewed those reasons carefully, as well as the history of the underlying litigation, we are persuaded that the judge acted well within his discretion in denying the motion. See Acosta-Mestre v. Hilton Intl. of Puerto Rico, Inc., 156 F.3d 49, 52-53 (1st Cir. 1998) (plaintiff's "contention that he should, in fairness, now be allowed to amend the complaint . . . ignores his own responsibility to have timely asserted the claim in his own complaint, or to give some adequate reason not to have done so").
Lastly, there is nothing for us to review with respect to Shehan's argument that the judge erred in not acting on his motion to compel production. Even were we to construe the judge's lack of action on the motion as a constructive denial, we would affirm it because Shehan was not entitled to discovery once his claims were dismissed or disposed of on summary judgment.
Judgment affirmed.
By the Court (Rapoza, C.J., Katzmann & Wolohojian, JJ.),
Clerk Entered: October 31, 2014.